Posts tagged John Maynard Keynes

Column on Why not Pessimism?

Why not Pessimism?

Tibor R. Machan

By most accounts there is little good news about any progress toward a freer society, quite the contrary. Around the globe, of course, there are some regions that are making small moves away from tyranny but even in those few, human freedom doesn’t appear to be a priority. Instead tribal and religious conflicts are the rule, even as the more vicious rulers are losing their grip on their populations. In Syria the tyrant is hanging on by a very thin thread yet elsewhere it’s mob rule that has replaced dictatorships.

In the USA, which at one time had the justified distinction of aspiring toward a fully free society–”leader of the free world”–the system and those who administer it pay hardly any heed to human liberty; the leadership is either wallowing in calls for economic equality (as if George Orwell had never written Animal Farm) or embarking wrangles about social and religious issues. (These Republicans certainly know how to drop the ball and miss opportunities!) Every problem that gains serious attention seems to call forth simply more statism from the elite; the possibility of turning toward more freedom is routinely denounced by prominent commentators. (I cannot get over Paul Krugman’s widely respected yet totally preposterous complaints about “market fundamentalism,” something he keeps alleging has gripped the country even though no evidence of it exists anywhere.)

Despite all this, there is reason to be hopeful. First, there is that proverbial long run to keep in mind; anyone who takes a close look at the sweep of human political history has to grant that there exists at least a “two steps forward, one back” phenomenon when it comes to the progress of freedom. Then there is the recent emergence of substantial respectability for libertarianism, with the likes of Ron Paul and his son Rand championing it openly among mainstream politicians and with the likes of Fox TV’s Judge Andrew Napolitano, John Stossel and others making a libertarian pitch on a very successful cable network, with regular appearances by and interviews with consistent, uncompromising champions of the fully free society. All those Reason Magazine and Reason.com folks certainly are a very welcome presence “on the air,” repeatedly, making their points very cogently. Gary Johnson, former governor of New Mexico, is going to give it a shot as the Libertarian Party’s presidential candidate, lending his sharp message–one I consider more coherent and on point than those of Ron Paul whose is marred by both certain domestic conservative themes and somewhat over the top ideas on international affairs–to the growing demands for freedom coming from America’s main street (as against the insistent statism we get from too many prominent academics). And there is the growing acknowledgement from many corners that the profligacy of government just cannot be sustained, not without the serious threat of a police state that would be needed to coerce us all into compliance with the resulting grotesque economic policies such as increasing taxes on productive citizens and clamping down on all efforts to resist confiscatory tax policies around the country and abroad. (It bears remembering that John Maynard Keynes considered the Third Reich as a very promising place for his policies of economic meddling by the state–see the Introduction he wrote for the German translation of The General Theory!) Also, the general population seems to be tiring of rich bashing, although there are those, like the Occupy Wall Street bunch, who continue to be ignorantly deluded about the desirability and feasibility of economic leveling.

It is wise also, I think, to keep in mind that massive semi-democratic systems are very unlikely to ever settle into a sensible political regime, given all the conflicting and often bizarre influences that guide public policies and produce truly awful elected officials–think Barney Frank here. Nonetheless over the long haul freedom is making progress. Not in all places, for sure, and with major gaps not just at the national level but in our backyards. When a totally corrupt and counterproductive war on drugs can continue in force, it does appear to be hopeless to expect increasing sanity in the country.

Yet, all in all, the trend, albeit a slow one with many detours and interruptions, does seem to be pointing toward a freer world than before.

Essay on Ideological Thinking Revisited

Ideological Thinking Revisited

Tibor R. Machan

Following the December 15th Republican “debate,” New York Times columnist Paul Krugman wrote once again about the evils of ideological thinking.

Krugman began piece by criticizing Mitt Romney for his repeated vacillations about which public policies he supports, which he opposes, a problem Romney has been plagued by most of his political life. But Krugman didn’t do what follows form this, namely, praise Romney for being a pragmatist, for his agility and flexibility. No, he decried the former Massachusetts’s Governor’s various views. And then he moved on to a more familiar target, one he has been shooting at every chance he gets. This is Representative Ron Paul’s integrity and consistency. Calling it ideological thinking, Krugman considers this a far great failing than anything he could find with Romney.

As Krugman summarizes all this, “In a way, that makes sense. Romney isn’t trusted because he’s seen as someone who cynically takes whatever positions he thinks will advance his career – a charge that sticks because it’s true. Paul, by contrast, has been highly consistent. I bet you won’t find video clips from a few years back in which he says the opposite of what he’s saying now. Unfortunately, Paul has maintained his consistency by ignoring reality, clinging to his ideology even as the facts have demonstrated that ideology’s wrongness.”

Ignore, please, for the moment that Krugman is every bit as ideological as would be anyone who tries to make sense of political economy, just one field of study that tries to learn generalities from the past so as to prepare for the future. The way this is done is by the identification of certain principles and then implementing them with the expectation that bad results will be avoided and good ones fostered. There really is no practical field, such as farming, medicine, engineering, child raising, and so forth, that can carry forth without this approach. Call it theoretical or ideological thought, no one who even dabbles in them can avoid them.

Ron Paul’s theoretical guidance comes from a certain school of free market economics, laid out by the likes of Ludwig von Mises and F. A. Hayek. (Other free market schools are those of Milton Friedman–the Chicago School–and those of James Buchanan–the Virginia School.) Massive volumes lay out these positions, in more or less technical ways, as they do the positions of Paul Krugman and his idol, John Maynard Keynes. It is routine in the social sciences for up and coming scholars and researchers to hitch their wagon to some earlier leader in their field. Just check out sociology or anthropology–they all follow this pattern. Krugman is no exception–he has hitched his wagon to Keynes and follows Keynes’ pragmatic, erratic economic thought. It happens to accommodate his hostility to principles. It doesn’t demand any integrity in one’s thinking; only expediency counts.

Because we are talking here about how political economy should be approached, or if you will macroeconomic theory, the impact of unprincipled thinking is quite remote. It is difficult to tell which results of such a mishmash political-economic thinking come from which ideas–as I have argued before, it is like getting food poisoning or, alternatively, health benefits from a smorgasbord meal which contains many diverse ingredients. But if you consider some areas of concern that are more immediately relevant to one’s life, the unprincipled approach shows its damage right away.

For example, it is generally understood that people with certain medical maladies should stick to a certain diet–think of diabetics. In engineering, medicine, nutrition, farming and the rest the practitioners learn their general principles and implement them in the course of their practice. Or consider morality; it is pretty much the case that lying and cheating ought to be avoided. Eve more drastically, deploying coercion in sexual relations is not just immoral but outright criminal. Everyone must, therefore, practice consensual sex so that rape, for example, is never acceptable. That is the principle of the thing, no exception.

Yet by Krugman’s lights to prohibit rape in all cases, as a matter of one’s ideology, is a serious flaw in one’s character, just as sticking to free market economic analysis is supposed to be in Ron Paul’s thought. As Krugman says, “Paul has maintained his consistency by ignoring reality, clinging to his ideology even as the facts have demonstrated that ideology’s wrongness,” but the only case he offers to illustrate the alleged wrongness is that Paul and his allies have warned about inflation for years and yet we are not seeing inflation break out all over. (Of course, there are those, rather more subtle economists, who see it break out in numerous hidden way–like postponing the destruction of the value of money for a while, kicking the can down the road to confront the mess later, e.g., by our grand children.) In other words, inflation can be prevented in various clever ways but not without eventual dire consequences. So here, too, Krugman is off.

What Paul insists on is consistency in one’s economic theorizing, something that every bona fide science insists upon. Pseudo-sciences like astrology and tarot reading don’t, with the result that they accomplish nothing useful at all. Most of Krugman’s ad hoc economics is like that–fancy footwork without any useful wisdom in its wake.

The ideology that Krugman follows despite denying it–just as many pragmatists deny that they firmly stick to some ideas–is the economic philosophy of coercion, of the state’s regimenting economic agents at nearly every turn. At no time will coercion as such be frowned upon by Krugman–it would be ideological to do so, in his view.

But the issue isn’t whether ideology is admissible but which ideology is sound, which bogus.

Column on The Keynesian Non-Answer

The Keynesian Non-Answer

Tibor R. Machan

The New Republic editorialized recently about the current economic mess and it is worth quoting it because the central passage is largely non-hyperbolic, non-polemical: “The classic response to [our current economic] situation, put forth by John Maynard Keynes in the 1930s, is for the government to spend money. During the Great Depression and then World War II, the Roosevelt administration and its allies did this in part by employing people directly, an idea that still makes sense even if it’s utterly unfashionable. But there are other ways to prime the pump. Government can invest in public works, whether it’s building roads or fixing up schools. It can put money in the hands of those who will spend it, by increasing public assistance or by targeting temporary tax relief to the poor and middle class. It can also supply money to state and local governments, which because of balanced-budget requirements are busy laying off first-responders, teachers, and other employees—making the unemployment problem worse.”

Notice that of course, the editors simply take it for granted that governments are authorized to engage in this kind of economic regimentation. Never mind that when citizens decide not to spend money they are doing it with what belongs to them and may indeed know what they are doing. But this doesn’t matter to the advisers of master planners. Such moral issues are to them trivial. They think like statists have always thought–what matters for them is only what the king, czar, or some other government aims for.

The history in the passage is wrong. Roosevelt’s Keynesian schemes didn’t work, as it has been shown by numerous economists. (See The Critics of Keynesian Economics [1960] edited by Henry Hazlitt, and Hunger Lewis’s Where Keynes Went Wrong [2009], among many works that critically and mostly dispassionately address Keynesian economics.)

Investing in public works is a complete illusion–most of such spending by government is directed politically; it’s nearly always graft, and what else could it be since government officials haven’t the faintest clue as to what the money they have extorted from the citizenry should be spent on. So the spending will be a response to the pleas of lobbyists and others who can be of help in reelecting the politicians.

Of course, balanced budgets are very rarely implemented. Politicians do not want their hands tied.

The citizens who taxes are extorted could, of course, spend their own funds or invest them or place them in banks that can lend them out all of which would end up employing people for purposes that actually fulfilled what the public wants. Indeed, it is only such spending that amounts to support for public works since the so called public works are nothing but made up projects that serve the agendas of the politicians and bureaucrats. (The editors are evidently unfamiliar with public choice theory for which Professor James Buchanan received his Nobel Prize. The idea is, simply put, that politicians and bureaucrats do not spend on public projects but on what they regard is important. It should also be considered that even those who would try to serve the public interest stumble upon the difficulty of knowing what that might be, seeing that the public is made up of millions of people who have hardly any common interests or objectives.)

I have never managed to appreciate why these people keep assuming that the judgments and actions of government officials are superior to those of the citizenry throughout the world where these Keynesian proposals are being made and followed routinely. I keep asking, “Who are these people whom we can trust with such tasks as running a country’s economic affairs?” Somehow thousands of intellectuals who would never entrust government with tasks such as censoring literature and newspapers nevertheless have no compunction about entrusting them with the very delicate and idiosyncratic tasks of directing people’s economic affairs. (I tend to think it is the ancient governmental habit, left over from feudal times.)

Column on Krugman’s Trashy Debating Style

Krugman’s Trashy Debating Style

Tibor R. Machan

Looks like critics of the free market are at their whit’s end. At least one of the most prominent of them clearly appears to be.

Princeton economics professor and columnist for The New York Times Paul Krugman has always been discourteous to those with whom he disagrees but his latest exhibition of his way of going about debating issues takes the cake. It used to be that he would call everyone who finds even the slightest merit in free market economic theory a “market fundamentalist,” suggesting thereby that such folks are, like all fundamentalists, mindless in their convictions and merely blindly follow some sacred text or book of instructions. Besides wishing to score points for his statist economic politics by smearing the ideas and methods of his intellectual adversaries, he also regularly distorts the scholarly lay of the land by claiming that America is in the grip of such fundamentalism. This basically meant that throughout the academic landscape departments of economics are filled by people who hold and teach views similar to those held by the late Milton Friedman, F. A. Hayek and Ludwig von Mises (among others).

While these thinkers did consider the free market superior to its statist alternatives–ones that give a decisive role to government intervention in the lives and activities of market agents–they did not, of course, hold identical views. Nonetheless, Krugman lumps them all as fundamentalists. Moreover, he rarely takes on living supporters of the free market, such as James Buchanan or Gary Becker, not to mention such current members of the Austrian School as NYU’s Israel Kirzner. Might we suppose that he doesn’t wish to engage anyone in a dialogue about economic policy but merely discredit them once they could not respond? (Just after Milton Friedman died, he and his frequent co-author Robin Wells penned an extensive and it turns out demonstrably inaccurate essay on Friedman for The New York Review of Books.) Also, despite Krugman’s allegation, there is plainly no dominance of free market thinking in American universities. Mainstream economists are mostly followers of such notables as Paul Samuelson and, of course, John Maynard Keynes, with quite a few who are influenced by the political economics of welfare statism. At the universities where I have taught throughout the last 40 plus years, economists may have been respectful toward free market theorists but were by no means fully in line with their views. So even in this elementary matter, Krugman has it wrong.

But the claim that the country is in the grips of market fundamentalism is also mistaken if it’s meant to apply to official public policies bearing on economic matters. Just for starters, the financial market place has been heavily regulated for over a hundred years–consistent free market theorists usually don’t favor a central bank such as the country’s Federal Reserve Bank (even though, somewhat paradoxically, Alan Greenspan had been such a consistent free market thinker before he was selected to head up the Fed). Furthermore, the plethora of government regulation of various elements of the economy, including virtually all professions (apart from the clergy, journalism, and writers of all stripes who are protected against such regulation by the First Amendment of the U. S. Constitution), is decisive evidence that free market thinking does not dominate public policy in America.

Yet, despite all this, here is a Nobel Laureate and professor from a most prestigious academic institution and columnist for a most distinguished newspaper who keeps trying to distort reality. Why? But I will not speculate, again. Who knows what Krugman’s agenda is.

One thing does clearly stand out in his approach to making a case for more and more government involvement in the economy. This is that he relies extensively on name calling, on besmirching those with whom he disagrees. In a recent column he went so far as to dismiss all those who hold views opposed to his as zombies! Yes, zombies. That means that people, some very distinguished scholars, who are convinced that a public policy of laissez-faire when it comes to a country’s economic affairs is best are all mindless. They do not merely think mistakenly but cannot think at all.

When a critic of a position needs to resort to this kind of technique with which to attract readers of his missives to his own outlook, it suggests that the intellectual merits of that position are truly hopeless. And that is precisely so. Statism in economics has for a long time been proven and shown to be utterly unsupportable, be this the Draconian sort one found in Soviet Russia and finds in North Korea or the less drastic kind that has just produced the worldwide financial meltdown, namely the more or less interventionist welfare state.